recession

Is All Job Creation Good?

March 20, 2010 By David G. Mitchell 7 Comments

As the USA seeks to recover from its recession and to add jobs to a contracting economy, many political and civic leaders have invested energy and resources in an effort to develop jobs. Cities offer incentives to businesses to hire and to bring jobs. State and federal agencies offer incentives to preserve and increase jobs. It is pretty clear that if we can solve the unemployment problems facing the USA, we will go a long way toward solving our economic problems as a whole.

The types of jobs that we should be creating, however, can be the subject of much debate. For example, several states are considering various forms of legalized gambling. The various Native American tribes that have opened casinos over the past several years have seen a huge increase in revenue and a huge improvement in their collective standard of living. Proponents of organized gambling argue that legalization of casinos would have the same effect in the urban areas that attract them. As one who lives in Central Florida, I would love to see that theory tested by adding casinos to downtown Orlando, an area that is in great need of investment by business.

You may agree with me or disagree with me with respect to legalized gambling. Perhaps you or someone you love has a problem with gambling addiction and you would rather not see opportunities for gambling increased. Perhaps you are morally opposed to gambling. Perhaps you worry about the ancillary vices that might accompany the liberalization of gambling laws. Perhaps you even disagree with the notion that legalized gambling will create jobs and improve local economies.

Perhaps your points are valid.

My point is not to debate the merits of the liberalization of gambling laws but to ask you to consider whether all job creation is truly good for our economy? If we open up vast areas of Alaska and undersea sites in the Gulf of Mexico to oil companies, we will generate jobs, cut our dependence on foreign oil and pump a lot of corporate dollars into our economy. We will also destroy vast areas of pristine wilderness. Is it worth it?

I am sure you can think of plenty of other examples of decisions that can be made to improve our economy but at the expense of our morality, or our environment, or our sense of place or any number of other valuable ideals. When you read about initiatives to create jobs, do you also think about the ramifications of those initiatives on other aspects of our way of life? Do you take the time to form an informed opinion, or do you just voice agreement with the notion that anything we can do to get Americans back to work should be done?

Where does economic necessity trump moral initiative? Where do you draw the line when you are considering which political initiatives you want to support and which you want to see defeated?

8 Ways A Recession Can Benefit You In The Long Run

June 26, 2009 By Amy L. Fontinelle 4 Comments

In the midst of a recession, it’s easy to feel like things will never get better. The news is filled with reports of layoffs and stock market declines, the atmosphere at work is somber, and talk about the economy even makes its way into the TV shows you watch to get away from it all.

But instead of just sitting around and feeling miserable or doing nothing and hoping for the best, there are steps you can actively take to improve your financial situation during a recession, when money is tight, that will continue to help you in the long run, when things ease up.

Learn strategies for reducing your taxes

If your employment situation and your life situation are very simple, there probably isn’t much you can do in this area. However, once you get into things like home ownership, long-term relationships, and earning self-employment income or running your own business, tax planning can save you major cash. You may not be able to afford a fancy accountant, but you can probably afford to buy a book or two on the subject.

Develop better savings habits

When the money is rolling in, it can be possible to ignore your spending and still manage to save some money every month. Or you might be so convinced that you don’t need to worry about money that you’re spending way more than you should. Having less money, or just wanting to be more conservative, make it a good time to put yourself on an automated savings plan. Once you get in the habit of paying yourself first, chances are, you’ll stick with it, even when times improve.

Refresh your job search and interviewing skills

It’s easy to get comfortable at the same job and not seek out opportunities to move up or move into a position you’d enjoy more. Layoffs, or the prospect of layoffs, can give you the push you need to explore options you wouldn’t have otherwise. Don’t assume that a recession means you have to take a step down the ladder or take the first job you can get.

Become a more frugal shopper

It’s easy to ignore a buck here and fiver there when you have the luxury of extra cash. When you don’t, it makes sense to learn how to get everything you need for the lowest price possible. Once you acquire this skill, you won’t want to go back to wasting money, even when you have the extra cash again, and the savings will really add up.

Learn to enjoy leisure time without spending money

You already know that spending money doesn’t guarantee a good time, and that spending money and then not enjoying yourself is a lot worse than doing a free activity and not enjoying yourself. So start having friends over to watch your favorite TV show instead of going out for dinner. Take advantage of the many “free” community activities provided by your tax dollars, like the library, public swimming pools, bike paths, neighborhood parks, and summer concerts. (True, swimming requires a bathing suit and biking requires a bike, but most people already own these things.) Go to meetup.com and find some people in your area who share a similar interest or hobby (a free one) like hiking, political activism, or volunteering. Engage in the social activities offered by your church or synagogue.

Learn frugal skills

Take the time to learn skills like cooking, cleaning, home improvement, gardening, and lawn care. Instead of habitually paying restaurants to cook your lunches and dinners, a housekeeper to clean your house, a plumber to unclog your drain, and a landscape company to mow and edge your lawn, do it yourself–especially if you’re out of work and have extra time. You’ll save money and get some exercise.

Find ways to reduce your recurring monthly expenses

Health insurance, car insurance, homeowners insurance, phone service, the cable bill–all of your recurring expenses are worth looking at once a year to see if they can be lowered. Perhaps your car has become so old that you can drop your collision coverage. Maybe you’ve gotten married and can get on a spouse’s health insurance plan and drop your individual coverage. Maybe there’s a cheaper phone plan available, or one that closer fits your needs. Life situations change, and product pricing changes. A lot can change in a year to make your old plans less suitable for your needs.

Find creative ways to make extra money

Everyone has something they can do for extra cash outside of a regular job. It can be as small as collecting and selling scrap metal or redeeming soda cans for cash. It can be a little more involved, like selling your old stuff on eBay or having a garage sale. In a best-case scenario, it’s a side job that you can do for extra cash when you have the time–handyman work, babysiting, writing articles–the possibilities are endless. You just have to think about what skills you have and who you can market those skills to.

If you’re tired of hearing about nothing but bankruptcies, foreclosures, and layoffs, start finding ways to brighten the situation. By looking at hard economic times as an opportunity to make changes that will benefit your finances in the long term instead of allowing yourself to make excuses and wallow, you can turn a negative situation into a positive one.

Reframing the Economic Crisis

March 30, 2009 By Jennifer Derrick 6 Comments

Okay, it’s no secret that the economy is in the tank. And it’s likely that this has you worried, angry, upset, and stressed out. And it’s no wonder. You’ve probably watched your investments fall, your retirement may be on hold indefinitely, you may have been laid off, your house is possibly worthless, and your credit lines have been cut. It isn’t helping that the media is beating the gloom and doom horse into the ground. You can’t go anywhere without hearing how bad things are, which likely only makes you feel worse.

In this time of misery, I’m going to offer up a challenge. Instead of going along with the gloom and doom scenario and feeling like complete crud, why not try reframing this crisis and its impact on your life into something more positive? Instead of giving in to the fear mongering and letting that fear control your life, why not try to take back some ownership of the situation?

Attitude has a lot to do with how you deal with a crisis. On the night his factory (which contained all of his work and works in progress) burned down, Thomas Edison said, “There’s value in disaster. All our mistakes our burned up. Thank God, we can start anew.” That’s a refreshing way to look at something that Edison could have chosen to view as a career ender. He could have wallowed in pity and failure but instead he chose to look at that disaster as a chance to start over and correct his past mistakes. He went on to invent many more things. Perhaps that’s how we should be looking at this crisis. Not as a disaster of epic proportions, but as a chance to learn something and correct our mistakes, thus improving our futures.

Obviously, this is easier said than done. I know how hard it is, when you’re staring at the bottom of your bank account, to find anything positive in the situation. But it’s worth the effort. What’s your alternative? To wallow in your misery? To consider yourself a failure? To stop trying? That’s no way to live. If you reframe the situation and choose to look at it positively, that is a catalyst for change that can bring you to a new, better place in life. Here are some stories that I’ve heard from people who are choosing to look at things differently:

From Luke, a laid off manufacturing worker: “Sure, I could be really pissed. The company I worked for for twenty years just laid me off with no severance, no benefits, nothing. I don’t have much savings, so things are definitely getting tight. But what good would it do me to sit at home and be pissed? That’s not going to bring in the money I need. I’m choosing to look a this as a good thing. I was getting kind of tired of working at that job, so this is my chance to do something else. I’ve always wanted to pursue my music but I was too tired at the end of my shift. But now I have plenty of time to practice and play. I’ve already got three paying gigs lined up and I’m sending out flyers to give music lessons. I’ve got one kid signed up. I’m still looking for

The Media, Recessions, History and Attitudes

February 14, 2009 By M. Beddingfield 5 Comments

The media would have us all believe that our beloved country has its foot to the floor in a race to heck. Everywhere you turn; there are reports of more business closings, higher unemployment and threats of losses in every quadrant of the nation. People are worried sick about what might happen. What might happen?

I think it’s time to turn off the news and let the big boys play ball with each other. Some of you might think that this is like the ostrich sticking its head in the sand but I know that history has a way of repeating itself. The economy goes through cycles. Let’s consider a few facts.

In the early 1990’s there was a recession, complete with high unemployment rates and Black Monday; where the Dow Jones suffered a record loss of 22%. High levels of unemployment and a huge government budget deficit continued for years. Yet our country continued to grow, progress continued to be made, especially in the field of technology. People prospered.

In 1980, there was a short recession of about six months. The housing market and automobile manufacturing were two of the hardest hit industries. Then, in 1981, there was an even worse recession, compared often to The Great Depression. The Federal Reserve responded to the recession by raising interest rates. The federal funds rate went as high as 20% in June 1981. The prime interest rate rose even higher to 21.5% by June 1982. This plunged the overall economy into a deep recession.

In December of 1982, the unemployment rate in the U.S. was 10.8%. The current unemployment rate is 7.2%. In the early 1980’s, the biggest job losses were in the housing, automobile and steel industries. The same is true today. In 1982, there were a number of bank failures and the FDIC spent millions purchasing bad loans. The following year saw even more bank failures.

When the current President, Ronald Reagan, finally admitted that we were in a recession, he raised corporate taxes and lowered interest rates. These measures gradually led to economic recovery.

Then there was the 1970’s. Remember the 1973 oil crisis and the 1979 energy crisis? I was just a teenager, but I remember well how everyone constantly talked about the problems. The same as today, the news and every type of media could only talk about how bad it was and how bad it was going to get.

I could go back every decade and find a recession, but this isn’t a history lesson. This is a blog about how to save money. However, sometimes we need a reminder about how things used to be, sort of a “good old day’s” reminder.

You know what worked back in the good old days? People lived within their means. The common folk, about 80% of America, tightened their belts, helped their neighbors and ate a lot of beans and rice. They didn’t buy new things; they fixed what they had or did without. They didn’t measure their self-worth by their net-worth. They had a certain attitude towards money that we can’t seem to get a grasp on today.

That attitude was – if you don’t have the money, don’t spend the money, pay your bills on time, help your neighbors and save every penny you can for a rainy day. Sounds like a pretty simple approach doesn’t it?

Recession Opportunities

November 20, 2008 By M. Beddingfield 1 Comment

Is this a recession or opportunity knocking? I’ve seen this question posed all over the media. A lot of the articles are aimed at higher income execs who work the stock markets. But I’m beginning to see front porch lights coming on in businesses everywhere.

Yes, we’re all still feeling the pinch of high unemployment and unstable market values, but gas prices are down and the holiday season is approaching. Businesses want you! They want your money and they’re girding their proverbial loins and preparing to battle for it. Perhaps now more than ever, we the customers are being offered more than just dried up old carrots for bait. We’re getting coffee and cookies too.

Here are a few trends that might be worth cashing in on:

Are you planning on buying a home in the next year or so? Big name, national builders are offering unprecedented discounts and perks. Some border on the extreme, such as offering to pay your mortgage for the first year or giving away a new car. Other incentives make more sense, like free upgrades and discounted prices. One company I read about offers free airline miles. Really? Buy a house and get a half a million airline miles — wow, that’s incentive.

Buy mutual funds. Buy low, sell high. The price is certainly low right now. If you are in it for the long haul, at least 5 years, every expert says to buy now. Even if you can only afford to spend $100, go for it. You could easily see your money sprout wings and fly.

Are you in the market for a new vehicle? Now is a great time to consider purchasing. It’s the end of the year, clean out the car lot and make way for the New Year’s models sale time. Car makers are also having a really tough time now. Many are offering financing with 0% interest. So if you have been saving up to buy a new car and you have a hefty down payment, start shopping around. Dealers are ready to drop their prices and deal.

Is your Adjustable Rate Mortgage about to reset? Now is the time to refinance and get a fixed rate. People with a good credit history are getting mortgages for 6+% for 30 yrs.

Credit card companies are struggling too. Many are offering discounts and lowering interest rates as incentive to pay any delinquent bills, even those that are only 30 days late. Maybe now would be a good time to call your credit card company and negotiate a lower rate. Or take advantage of 0% balance transfer offers-just be sure to pay off and cancel the card before the trial period is up.

Big name retailers are forecasting low holiday sales and they are scared. They are advertising an earlier and longer shopping season with marginally larger discounts. Take advantage of perks like lay-a-way, buy one get one free, early bird sales, coupon days, and of course, Black Friday sales. Don’t forget that many retailers offer special discounts on online purchases and you can also print online coupons to take with you. Also be aware that retailers may not be as heavily stocked this year. If you want a popular or big ticket item, it’s probably best to shop early.

Furniture and appliance stores are advertising 0% interest and no payments for several months. This can be a tricky one for the customer. If you’re in the market for a big ticket item, make sure you read the fine print. What they don’t tell you is that the interest adds up the whole time you are not paying. So, the best thing to do is bargain with cash. They have sales quotas and they want to make that sale.

Banks are in the market for your money too. They are offering everything from free checking to free automatic bill paying online to coffee and cookies while you wait. Interest rates vary widely. You can shop around and get the best value for your cash. Don’t forget to check out the online banks while you are shopping. Speaking of banks, if you haven’t started saving toward your emergency fund, now is the time to do it.

Restaurants are offering more food for your funds as well. I’m seeing a lot more coupons in the papers and all you can eat specials.

I’ve noticed small businesses are getting in on the competition too. Locally they are offering small incentives, like free coffee or 2 liters. A few places are bringing back the punch cards where you buy so many of an item and get the next one free.

I know that specials and sales are nothing new, but I’m glad to see what appears to be a trend to give the customer more attention and value for their hard earned cash. We may or may not be in a recession, but there are definitely more opportunities waiting for you to answer their knock, knock, knocking.

Recession? Maybe. Protect Yourself in 2008

December 28, 2007 By Jennifer Derrick 10 Comments

The drumbeat of recession talk continues to grow louder in the media and amongst financial analysts. The housing crisis, the credit crunch, high energy prices, the falling dollar, inflation, and slowing consumer spending are all contributing to a troubled economy. While no one can see into the future and know for certain whether or not there will be a recession in 2008, it’s not unwise to take a few steps now to protect yourself in case a recession does come to pass.

The biggest problems people face during a recession are layoffs and inflation. Both put a strain on the family budget, but neither is insurmountable, particularly if you do a bit of planning and saving beforehand to protect yourself. Here are some simple steps you can take that will help you ride out a possible recession without too much damage to your financial picture.

First, retool your resume, start networking, and pick up some additional skills to increase your marketability. If the economy tanks, companies will have to cut spending and this often means layoffs. You should be prepared for a job hunt, particularly if you work in an industry or for a company that is particularly shaky. Having an updated resume and a rolodex full of contacts gives you a head start should a layoff happen. Use this time to learn new skills such as new software programs, business management, a foreign language, etc. The more skills you have the more valuable you are, both to your current employer and a prospective employer. When layoffs happen, companies usually let the least skilled, least valuable workers go first. Additional skills may act as an insurance policy for your job if the worst happens.

Second, start putting more money in your emergency fund, or start one if you don’t have one. If you get laid off, you’ll need to rely on your emergency fund until you find a new job so start pumping some extra money in there. Keep your emergency stash in an account with no withdrawal penalties, and make certain you’re getting a good interest rate.

Third, start curbing your spending now, rather than waiting until you’re forced by circumstance to do so. Cut down on unnecessary spending and use that money to fund your emergency fund. Maybe you want to put off some travel (particularly international travel since the exchange rate is so poor right now), home remodeling, a car purchase, moving, or other big expenses and instead save that money in case you need it. The less you live without now, the more money you’ll have saved if you have to go without a paycheck for a while. Those who wait until the layoff happens to slow their spending are starting from behind.

Fourth, refinance or pay off any debt that’s at a variable interest rate and don’t incur any additional debt. This includes credit cards, adjustable mortgages, home equity lines of credit, etc. Interest rates are probably going to go up and this will increase your payments. In the case of credit cards, if you are laid off or have other financial problems that cause you to miss a payment or pay late (on any bill, not just the card in question), you are subject to their “universal default” policy which basically means that if they see something on your credit report they don’t like, they are free to raise your rate sky high. For this reason, don’t take on any more credit card debt, particularly if you feel like hard times may be ahead of you.

Fifth, learn money saving and frugal skills now. Learn how to cut your grocery bill by using coupons and shopping the sales. Try stockpiling food bought at low prices to avert price increases and to have a stash in case you need to cut spending even more. Learn which stores have the best prices on which products. Become familiar with the consignment and thrift stores in your area and their offerings and prices. Learn how to do more for yourself such as lawn care, home maintenance and repair, and cooking. Cut your utility bills by conserving power, water and fuel. Cut your gas bill by driving less and consider trading the gas guzzler for a more fuel efficient model. Every bit of money you can save by doing something cheaper or on your own is more that you can save in case you need it. You’ll also curb some of the effects of inflation on your budget.

Sixth, get the advice of a professional financial advisor that you trust to help direct your investment strategy. I’m not a stock market guru so I can’t tell you where you should be investing money at this time. But there are plenty of professionals out there who can help protect your investments in a troubled economy. If you have a lot of money in stocks or bonds (this includes 401k’s), get some help from a professional. They’ll advise you as to which “safer” areas are good bets for earning decent returns during a recession.

We don’t know for certain that a recession is coming and, if so, how bad it might be. But there are indicators in the economy that we might be heading that way. Don’t be caught by surprise. Take some steps now to protect your financial future. What’s the worst that can happen? You’ll save up a bunch of money, be prepared to look for a new job, become more self reliant, and take some steps to protect your investments. Not a bad strategy, even if we don’t have a recession.

Image courtesy of wallyg